Electricity companies told to do more to cut costs

ENERGY regulators have told five of the six companies that own and operate Britain’s electricity network they must do more to cut costs for consumers.

Electricity companies are ordered to think again and cut bills. Picture: PA

Ofgem has rejected their business plans for the eight-year period between April 2015 and March 2023.

Scottish and Southern Energy (SSE) and ScottishPower Energy Networks were among those told they needed to “go further” to help customers and that regulators expected improvements to be made when they re-submit their plans in March.

Western Power Distribution, which serves south Wales, the Midlands and the south-west of England, was the only firm to have its price controls agreed .

Its business plan includes about £7 billion of expenditure of which around £3bn is for investment to upgrade and maintain its network.

For customers of Western Power, bills should be reduced by an average of 11.6 per cent or around £11.30. Around 19 per cent of an annual electricity bill is made up of network distribution costs.

The other networks are SSE and ScottishPower Energy Networks in Scotland and North Wales, Electricity North West, Northern Powergrid and UK Power Networks, which covers London and the South-East.

Hannah Nixon, Ofgem’s senior partner for distribution, said: “We are pleased that nearly all companies have pledged to cut bills, but we feel that most companies can go further in cutting their costs and expect to see further improvements when they re-submit their plans in March.”

Despite rejecting their business plans, Ofgem did praise the companies for responding positively to its call to deliver investment efficiently, with more than £2bn in cost reductions since their initial forecasts in 2012.

It is estimated that during the price control period, total expenditure will be £27bn across all companies, of which around £13bn is for network investment specifically.

The companies will have to submit revised plans by mid-
March before a final determination by Ofgem next November.

A ScottishPower Energy Networks spokesman said it was “disappointed that our investment proposals” had not been approved by Ofgem.

He said: “We consulted widely on our plans and made significant efficiencies and savings during this process to put together proposals that would have seen record levels of investment, at the same time as improving service to customers and reducing costs to customers.”

He added: “A decision to fast-
track [rather than re-submit in March] would have allowed us to begin discussions with the supply chain immediately, and ensure that we could have agreed the best contracts possible to deliver value for money. We will now review Ofgem’s decision as we look to submit revised investment proposals in March 2014.”

SSE Power Distribution said in a statement: “SSEPD believes its business plan, including a 10 per cent cut in our part of the electricity bill in 2015, is aligned with the interests of consumers and we are confident that we can work with Ofgem to address the issues, engage further with our stakeholders, and re-submit an amended business plan for agreement by the end of 2014.”